Thursday, October 30, 2008

The unemployment rate is at 6.1 percent. Does this number accurately reflect reality?

Probably not. The unemployment rate leaves out underemployed (part-time workers who want or need full-time work), people who aren't collecting unemployment insurance but who are unemployed, and people who have dropped out of the labor market altogether. A better piece of data might be what the Bureau of Labor Statistics calls the 'U6.'

To compile the U6, the BLS takes the number of unemployed, plus all marginally attached workers, plus all of those employed part-time for economic reasons, and then calculates that total as a percentage of the sum of the entire civilian labor force plus marginally attached workers.

As you can see from the data-table above, the U6 rate right now is 11.0 percent and rising. This means that the economy is underperforming for about 1 in every 9 of us. So chances are, we each know at least somebody who is struggling. And things are getting worse, not better.

My sense is people have a pretty good feel for their economic environment right now, and they don't like what they feel.

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